The Financial Times Guide to Using the Financial Pages

Overview

How to use the financial pages to make better and more informed business and investment decisions. All too often, the world of finance appears in the media as unfamiliar territory obscured by jargon. This authoritative and invaluable guide for anyone who needs to read the financial pages of a newspaper like the Financial Times, explains where and when to find what you want and how to make best use of the comprehensive range of financial and economic statistics. Completely up-to-date throughout, it shows you how ...
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1994 Trade paperback 2nd ed. New. No dust jacket as issued. Trade paperback (US). Glued binding. Audience: General/trade. Book Description With 30, 000 copies sold of the last ... edition, The Financial Times Guide to Using the Financial Pages has become an international bestseller, as well as receiving widespread critical acclaim from both professional and private investors. This new edition has been completely updated and includes new chapters on American, continental European and emerging equity markets. There is also comprehensive analysis of the effect of the euro on financial markets, as well as greater coverage of the impact of the internet. The Financial Times Guide to Using the Financial Pages will introduce readers to the art of reading and interpreting the financial pages whether they view them in a newspaper or online. In addition to providing a simple guide to understanding the statistics and the language of modern finance, it will allow you to follow and act on the price movements of a wide range Read more Show Less

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New Ships From Canada. New. No dust jacket as issued. Trade paperback (US). Glued binding. Audience: General/trade. Book Description With 30, 000 copies sold of the last ... edition, The Financial Times Guide to Using the Financial Pages has become an international bestseller, as well as receiving widespread critical acclaim from both professional and private investors. This new edition has been completely updated and includes new chapters on American, continental European and emerging equity markets. There is also comprehensive analysis of the effect of the euro on financial markets, as well as greater coverage of the impact of the internet. The Financial Times Guide to Using the Financial Pages will introduce readers to the art of reading and interpreting the financial pages whether they view them in a newspaper or online. In addition to providing a simple guide to understanding the statistics and the language of modern finance, it will allow you to follow and act on the price movements of a. Read more Show Less

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Overview

How to use the financial pages to make better and more informed business and investment decisions. All too often, the world of finance appears in the media as unfamiliar territory obscured by jargon. This authoritative and invaluable guide for anyone who needs to read the financial pages of a newspaper like the Financial Times, explains where and when to find what you want and how to make best use of the comprehensive range of financial and economic statistics. Completely up-to-date throughout, it shows you how to keep track of all the important statistics covered, including developments in shares, gilts and foreign exchange fluctuations; covers all the key financial and economic indicators, ranging from the 'Footsie' to the retail price index; explains the role and behaviour of the players in the financial markets; looks at the different markets explaining how they work and how they may be read and employed by private investors or professional managers; examines the UK, European and world economies and the effects key economic indicators have on the financial markets; includes useful reference tables with explanations to accustom you to the ease with which the numbers can be interpreted with just a little background; and introduces the tools and language of modern finance. Whether you're investing in the markets, raising capital or need to know how the financial world affects your business, you will quickly discover what gains can be made if you know how to use the financial pages.
Read More Show Less

Product Details

  • ISBN-13: 9780273612490
  • Publisher: Financial Times/Prentice Hall Books
  • Publication date: 4/1/1995
  • Series: Financial Times Management Ser.
  • Edition number: 2
  • Pages: 224
  • Product dimensions: 6.16 (w) x 9.20 (h) x 0.60 (d)

Read an Excerpt

PREFACE:

Introduction

Money and the financial markets, as reflected in the television or radio news or the financial pages of a newspaper like the Financial Times, may often seem to be a different world, something well beyond the experience of most people. But the global movement of capital, the constant shifting of what are often vast amounts of money, does have a connection with our daily lives. Everyone has some contact with the financial system: through having a bank account; through contributing to a pension fund; through buying an insurance or life assurance policy; or through taking out a mortgage or running up an overdraft. And despite its appearance as a foreign country accessible to only a favored few, and dealing in a baffling language of numbers and jargon, its basic workings are fairly simple to grasp.

The markets are simply a huge clearing house where the different financial needs of individuals, companies and governments can be brought together and matched through appropriate pricing mechanisms. They might be actual places or they might be networks of computer screens and telephones. Either way, they address two fundamental needs: what is variously known as saving, lending or investing—the use of funds excess to spending requirements to secure a return; and borrowing—the demand for funds over and above those already owned, to put to work in various ways.

The players in the financial markets and in the wider economy can be classified into four broad groups:

  • Investors who have money to spare to spend on assets and, indirectly, lend it to the issuers of those assets. This includes individualinvestors, though nowadays the bulk of investment is done by large investing institutions such as pension funds and insurance companies.
  • Companies which want to borrow money in order to buy capital goods or increase the scale of their business.
  • Financial institutions (banks, building societies, brokers, dealers, marketmakers, etc.) which act as intermediaries, bringing together the borrowers and lenders in various marketplaces.
  • Governments which act as both borrowers and lenders, but which, in addition, regulate the markets and attempt to monitor and influence the state of the economy through fiscal and monetary policy.

The role and behavior of each of these players are examined in the first four chapters of this book. The second part of the book looks at the different markets in which they operate: the stock markets, bond markets, international capital markets, foreign exchange and money markets, futures and options markets, and commodity markets. Each chapter takes the relevant charts and tables from the Financial Times and explains how they work, what their significance is, and how they might be read and employed by private individuals or business managers. The third part broadens the picture, examining the UK, European and world economies, and the effects that key economic indicators have on the financial markets.

The final chapters of the book, newly added for the third edition, move beyond the financial pages to explore other sources of financial information: the variety of newspapers, magazines, newsletters and other publications, and how to read between the lines of their financial reporting; the new markets and online datafeeds, including the Internet; and how to use company reports to find the key performance ratios. Readers who are very unfamiliar with the Financial Times may want to start here: chapter 18 gives a brief synopsis of the newspaper's contents. Lastly, two new appendices reiterate the key ratios for easy reference and list the constituent companies of the leading market indices in the United Kingdom and the United States.

This book is intended for anyone who reads or needs to read the financial pages of a newspaper. It aims to provide a simple guide to understanding the statistics and the language of modern finance. Right from the first chapter, tables of figures with explanations are introduced to accustom the reader to the ease with which the numbers (as well as the reports and comments) can be interpreted and used with just a little background.

Much of the importance of the statistics lies in the ratios between numbers rather than in the actual numbers themselves. It is the relationship between the figures, both across companies, industries, sectors and economies, and over time that is critical. It is these ratios that investors, companies and the finance types that "make" the markets pore over to identify past patterns, future trends, and present opportunities and dangers.

The tables and charts of the financial pages are reference points, published every day as a snapshot of the state of the markets. But the markets themselves are dynamic, constantly in flux and, in some cases, trading 24 hours and across the globe. For readers needing immediate, real-time data, there are the more sophisticated sources of financial information of the computer age, screen-based data and telephone services. These are discussed in chapter 17.

Nevertheless, FT figures are a globally used reference point and the newspaper plays an important institutional role in the financial markets. It has pioneered such industry standards as the FT-SE (known as the "footsie") IOO index, used widely as an indicator of the state of the UK stock market, and as a benchmark for the performance of investors' asset portfolios. Furthermore, its pages fulfill the obligation of unit trusts to publish data on the value of their funds.

Although this is the Financial Times guide to using the financial pages, the map it provides to understanding that newspaper's financial and economic reports, comments, tables and charts is equally applicable to other papers, and even to other media. The newspaper is merely the most detailed and widely used of the non-specialized media. Indeed, other papers frequently provide information on many of the leading indicators that the Financial Times has developed, such as the Footsie and its derivative products.

Before turning to the markets and their statistical analysis, some basic and recurring mathematical concepts might be valuable:

  • Average: a single number used to represent a set of numbers. It can be calculated variously as: a mode, the number that occurs most frequently in a set of numbers; a median, the number with 50 per cent of the rest Iying below it and 50 per cent above, or if there is an even quantity of numbers, the average of the middle two; the arithmetic mean, the total sum of the numbers divided by the quantity of them; and the geometric mean, the figure that derives fro multiplying the numbers together and taking their nth root, where n is the quantity of numbers.
  • Percentage: the proportion that one number represents of another or the change in a number from one period to another. To calculate the proportion or percentage of y that x represents (whether x is another number or the difference between one number over two periods), x is divided by y. The result will be a fraction of 1, and to convert it into a percentage figure, it is simply multiplied by 100. Movements of a percentage figure might be mentioned in terms of points (one point is one percent) or basis points (one basis point is one hundredth of one percent). Percentage points or basis points are different from percentage changes.
  • Inverse and positive relationship: the connection between two numbers. Numbers with an inverse relationship move in opposite directions; those with a positive relationship move together. This is the mathematical explanation of why, for example, bond prices and yields move in opposite ways; if x is equal to y divided by z, and y is constant, then as x rises, z falls or vice versa. But if x or z is constant, x and y or z and y will rise or fall together. The two pairs are in a positive relationship.
  • Index: a number used to represent the changes in a set of values between a base year and the present. Index numbers blend many different ingredients into a single index, and measure changes in it by changes in its parts. This involves giving appropriate weighting to the components according to their importance in what is being measured. A weighted average is usually calculated as an arithmetic mean the same weights throughout (a base-weighted index) or adjusting the weights as the relative importance of different components changes (a current-weighted index). Baseweighted indices may have the base shifted periodically.

With these simple tools and developments of them explained in the text, the reader should be well equipped to negotiate the figures of the Financial Times' financial pages, analysed in what follows.

Read More Show Less

Table of Contents

Foreword
Introduction
1 Investors 3
2 Companies 25
3 Financial institutions 45
4 Governments 61
5 Stocks and shares: the UK equity markets 81
6 Indices and aggregates: market indicators 111
7 International equities: the world stock markets 129
8 Trusts and funds: the managed money markets 155
9 Bonds and Eurobonds: the international capital markets 171
10 Cash and currency: the foreign exchange and money markets 193
11 Futures and options: the derivatives markets 215
12 Primary products: the commodities markets 235
13 UK economic indicators 253
14 The European economy: market integration and monetary union 285
15 The world economy: trade, growth and international institutions 295
16 Company and investor lives: the key performance ratios 313
17 Finance on the superhighway: electronic information and markets 331
18 Sources of information: a brief guide 345
Appendix 1: The key ratios guide 355
Appendix 2: The key indices guide 357
Index 362
Read More Show Less

Preface

PREFACE:

Introduction

Money and the financial markets, as reflected in the television or radio news or the financial pages of a newspaper like the Financial Times, may often seem to be a different world, something well beyond the experience of most people. But the global movement of capital, the constant shifting of what are often vast amounts of money, does have a connection with our daily lives. Everyone has some contact with the financial system: through having a bank account; through contributing to a pension fund; through buying an insurance or life assurance policy; or through taking out a mortgage or running up an overdraft. And despite its appearance as a foreign country accessible to only a favored few, and dealing in a baffling language of numbers and jargon, its basic workings are fairly simple to grasp.

The markets are simply a huge clearing house where the different financial needs of individuals, companies and governments can be brought together and matched through appropriate pricing mechanisms. They might be actual places or they might be networks of computer screens and telephones. Either way, they address two fundamental needs: what is variously known as saving, lending or investing—the use of funds excess to spending requirements to secure a return; and borrowing—the demand for funds over and above those already owned, to put to work in various ways.

The players in the financial markets and in the wider economy can be classified into four broad groups:

  • Investors who have money to spare to spend on assets and, indirectly, lend it to the issuers of those assets. This includesindividualinvestors, though nowadays the bulk of investment is done by large investing institutions such as pension funds and insurance companies.
  • Companies which want to borrow money in order to buy capital goods or increase the scale of their business.
  • Financial institutions (banks, building societies, brokers, dealers, marketmakers, etc.) which act as intermediaries, bringing together the borrowers and lenders in various marketplaces.
  • Governments which act as both borrowers and lenders, but which, in addition, regulate the markets and attempt to monitor and influence the state of the economy through fiscal and monetary policy.

The role and behavior of each of these players are examined in the first four chapters of this book. The second part of the book looks at the different markets in which they operate: the stock markets, bond markets, international capital markets, foreign exchange and money markets, futures and options markets, and commodity markets. Each chapter takes the relevant charts and tables from the Financial Times and explains how they work, what their significance is, and how they might be read and employed by private individuals or business managers. The third part broadens the picture, examining the UK, European and world economies, and the effects that key economic indicators have on the financial markets.

The final chapters of the book, newly added for the third edition, move beyond the financial pages to explore other sources of financial information: the variety of newspapers, magazines, newsletters and other publications, and how to read between the lines of their financial reporting; the new markets and online datafeeds, including the Internet; and how to use company reports to find the key performance ratios. Readers who are very unfamiliar with the Financial Times may want to start here: chapter 18 gives a brief synopsis of the newspaper's contents. Lastly, two new appendices reiterate the key ratios for easy reference and list the constituent companies of the leading market indices in the United Kingdom and the United States.

This book is intended for anyone who reads or needs to read the financial pages of a newspaper. It aims to provide a simple guide to understanding the statistics and the language of modern finance. Right from the first chapter, tables of figures with explanations are introduced to accustom the reader to the ease with which the numbers (as well as the reports and comments) can be interpreted and used with just a little background.

Much of the importance of the statistics lies in the ratios between numbers rather than in the actual numbers themselves. It is the relationship between the figures, both across companies, industries, sectors and economies, and over time that is critical. It is these ratios that investors, companies and the finance types that "make" the markets pore over to identify past patterns, future trends, and present opportunities and dangers.

The tables and charts of the financial pages are reference points, published every day as a snapshot of the state of the markets. But the markets themselves are dynamic, constantly in flux and, in some cases, trading 24 hours and across the globe. For readers needing immediate, real-time data, there are the more sophisticated sources of financial information of the computer age, screen-based data and telephone services. These are discussed in chapter 17.

Nevertheless, FT figures are a globally used reference point and the newspaper plays an important institutional role in the financial markets. It has pioneered such industry standards as the FT-SE (known as the "footsie") IOO index, used widely as an indicator of the state of the UK stock market, and as a benchmark for the performance of investors' asset portfolios. Furthermore, its pages fulfill the obligation of unit trusts to publish data on the value of their funds.

Although this is the Financial Times guide to using the financial pages, the map it provides to understanding that newspaper's financial and economic reports, comments, tables and charts is equally applicable to other papers, and even to other media. The newspaper is merely the most detailed and widely used of the non-specialized media. Indeed, other papers frequently provide information on many of the leading indicators that the Financial Times has developed, such as the Footsie and its derivative products.

Before turning to the markets and their statistical analysis, some basic and recurring mathematical concepts might be valuable:

  • Average: a single number used to represent a set of numbers. It can be calculated variously as: a mode, the number that occurs most frequently in a set of numbers; a median, the number with 50 per cent of the rest Iying below it and 50 per cent above, or if there is an even quantity of numbers, the average of the middle two; the arithmetic mean, the total sum of the numbers divided by the quantity of them; and the geometric mean, the figure that derives fro multiplying the numbers together and taking their nth root, where n is the quantity of numbers.
  • Percentage: the proportion that one number represents of another or the change in a number from one period to another. To calculate the proportion or percentage of y that x represents (whether x is another number or the difference between one number over two periods), x is divided by y. The result will be a fraction of 1, and to convert it into a percentage figure, it is simply multiplied by 100. Movements of a percentage figure might be mentioned in terms of points (one point is one percent) or basis points (one basis point is one hundredth of one percent). Percentage points or basis points are different from percentage changes.
  • Inverse and positive relationship: the connection between two numbers. Numbers with an inverse relationship move in opposite directions; those with a positive relationship move together. This is the mathematical explanation of why, for example, bond prices and yields move in opposite ways; if x is equal to y divided by z, and y is constant, then as x rises, z falls or vice versa. But if x or z is constant, x and y or z and y will rise or fall together. The two pairs are in a positive relationship.
  • Index: a number used to represent the changes in a set of values between a base year and the present. Index numbers blend many different ingredients into a single index, and measure changes in it by changes in its parts. This involves giving appropriate weighting to the components according to their importance in what is being measured. A weighted average is usually calculated as an arithmetic mean the same weights throughout (a base-weighted index) or adjusting the weights as the relative importance of different components changes (a current-weighted index). Baseweighted indices may have the base shifted periodically.

With these simple tools and developments of them explained in the text, the reader should be well equipped to negotiate the figures of the Financial Times' financial pages, analysed in what follows.

Read More Show Less

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